S.D. Firm in Default on 2 Loans : IRT to Sell 2 Divisions in ‘Restructuring Move’
In default on two bank loans and in the process of laying off at least 30 employees, troubled IRT Corp. announced Tuesday that it plans to sell two divisions that account for about 40% of its sales.
In what IRT described as a restructuring move, the company said it signed a memorandum of understanding with Maxwell Laboratories of San Diego to sell Maxwell its system survivability and high-power microwave business units, both based in San Diego, for a price estimated at $7.4 million, subject to “adjustment in certain events.”
In an unrelated event, IRT said it signed a letter of intent to sell its Vienna, Va.-based national securities systems business to Jaycor, a San Diego-based defense contractor, for about $1.2 million, a price also subject to “certain events.”
The announcement comes a few days after IRT went in default on July 31 on a $7.35-million loan owed to Sanwa Bank California.
Earlier this year, the company disclosed that it was in default on a $5-million unsecured loan from Citicorp. Citicorp then agreed to defer overdue interest payments until December in exchange for a $1.25-million lien on IRT’s assets.
An IRT spokeswoman said the restructuring of IRT, which includes the sale of the divisions to Maxwell and Jaycor, is being done at the request of the two lenders.
She declined to speculate on what actions the banks may take to try to recover their loans.
Asked about its cash position and how IRT will come up with enough working capital to continue operations, the spokeswoman said only that the company is holding discussions with its two lenders while “watching our expenditures with extreme care and working out a business plan to go forward at IRT.”
To reduce overhead, IRT will lay off 30 to 35 employees this week, the spokeswoman said. San Diego-based IRT now employs about 340.
The divisions that are to be sold accounted for about 40% of IRT’s $34.4 million of sales over the year ended March 31.
For the period, IRT posted a loss of $12.3 million, attributing the red ink in part to write-offs of obsolete inventory and equipment.
IRT stock closed down $.125 a share, at $2, in American Stock Exchange trading Tuesday.
The sale of the units to Maxwell is subject to approval of a definitive agreement by IRT’s and Maxwell’s boards and shareholders, while the Jaycor sale is subject to the approval of both companies’ boards and IRT’s lenders.
IRT’s annual meeting, which customarily is held in August, has not yet been scheduled but is at least 60 days away, the spokeswoman said.
In May, IRT turned over the deed to its 86,000-square-foot headquarters building in La Jolla to mortgage holder Trust Co. of the West after problems meeting mortgage payments.
In exchange, TCW extinguished the $14.2-million mortgage on the building and gave IRT free rent through December.
